The Seven Sins of Spreadsheets in Lease Accounting and Compliance

While there can be some advantages to using spreadsheets including the speed and cost of set up, the ease of modification, and the flexibility of conducting simple calculations, there are several disadvantages which far outweigh these benefits. Organisations that use spreadsheets to manage their ever-growing lease portfolios constantly struggle to address a variety of issues surrounding accountability, visibility and traceability of their data, leading to potential compliance issues.

Beyond compliance, how an organisation manages its leases, and overall portfolio can influence your overall finances, through the very tangible costs of missed renewal dates and contract responsibilities. Something that only gets harder as your business grows. These areas cannot be effectively addressed without a specialist lease accounting and management solution to maintain compliance but also support you in your day-to- day processes.

Lease accounting and management can be labour intensive and add considerably to the total cost of managing your portfolio. A good lease accounting and management system will speed up your audits and administration, making them both fast and efficient, leaving your property and finance team with more time.

A comprehensive lease accounting and management solution can lead to significant cost savings in audits and compliance, while poor lease accounting can negatively affect the accuracy of financial reports, leading to non-compliance, fines and further impacts to your business through share price decreases and reputational damage.

There are many reasons why spreadsheets are not the solution for all business needs. With so many potential causes and opportunities for errors, companies must look to software solutions that are designed for specific, specialised tasks to eliminate these errors and ensure sound financial tracking and reporting.

Corporate governance requirements

Today, companies of all sizes are subject to increased scrutiny by government and regulatory boards reacting to recent business reports and investor’s requests for higher standards of accountability, transparency, and overall corporate behaviour.

Compliance with the latest lease accounting standards including IFRS 16, ASC 842 for international portfolios as well as the new FRS 102 for lease accounting means that there is an array of lease accounting standards that need to be met to prove compliance, each requiring specialised reporting.

With such a high degree of attention focused on your organisation, why would you risk the integrity of your financial data by relying solely on spreadsheets?

Accurate and effective implementation, management, monitoring, and updating can easily be accomplished with a purpose-built lease accounting and management system in place; it’s the only real way to ensure compliance.

Inaccurate calculations

Too many spreadsheets contain errors, which is to be expected with information entered by hand. Whether it be the background data or the formula itself, there’s little doubt that some calculations, when based on a spreadsheet, are likely to be inaccurate. Several people within one accounting department will often access, manage, and edit the same spreadsheet, making errors even more likely. In addition, a spreadsheet that is designed and managed by an individual brings its own risks of over reliance on their knowledge of the formulas etc, which if they were to leave the company, would be lost.

A dedicated lease accounting and management system will eliminate these costly errors. Complex calculations are automated and fixed for your accounting needs, ensuring accuracy and correct outputs for your whole portfolio to meet any and all lease accounting requirements in a way that is quick and easy, completed with a click of a button.

Lack of an audit trail and overall security

A dedicated lease accounting and management system will track and record every detail of every action ever made by any user, which is unachievable with spreadsheets. This makes it very simple to ensure the security and integrity of your lease data. A specialist system will require a valid username and password combination to enter the system and will enable department heads to define security at an individual level to ensure that confidential information can be viewed only by those that need to see it and safely hidden from those who don’t. In other words, limited access can be set by user in order to restrict read only and editing rights.

Lease reporting falls apart without grouping

The ability to group leases with assets is key in order to establish hierarchical relationships and dependencies. A specialist lease accounting and management system will display such links. A typical example of this might be a property with payable lease, sublease and leased equipment which would all be displayed under a single property within a specialised solution.

For obvious reasons, spreadsheets are unable to accommodate complex portfolios of grouped leases, making it difficult to accurately track and manage these important hierarchical dependencies.

Access to multi-currency, multi-lingual, multi-standard capabilities

If your organisation operates in many different countries then multi-currency, multi-lingual, and multi-standard capabilities are most likely imperative in your lease accounting procedures. A specialist system will have these capabilities to allow core information to be compliant ensuring all data meets international accounting standards. Trying to utilise excel for global reporting can result in duplication of spreadsheets, and a lot of additional time to create the various reports that are needed, without an iron clad guarantee that the final figures will be correct and ensure compliance.

Unable to meet historical reporting and forecasting requirements

Composing reports and forecasts can be a complicated and daunting process, especially if attempted in a spreadsheet. With the raw data sitting in a spreadsheet dictating that each report be constructed individually using often, complex macros, this provides much room for error as well as wasting valuable time at month-end.

A specialist lease accounting system will incorporate standard and customised reporting and forecasting templates to ensure an intuitive method of extracting and analysing portfolio data quickly
and accurately.

Lack of confidence in data integrity

Total control over your lease data simply cannot be achieved using
a spreadsheet. User input errors or unintentional miscalculation inaccuracies within your data and lease accounting are inevitable. With that said, how can you be 100% confident in the integrity of this vital data?

A specialist lease accounting system will have strict security features in place to effortlessly address these issues. Furthermore, entering and maintaining lease data becomes an endless task when working within the parameters of a spreadsheet. A dedicated system will automate the entire lease accounting and management process. From data import capabilities to automated reports and forecasts, a significant amount of valuable time can be shaved off the entire process.

While the spreadsheet is an integral part of business operations, it cannot perform all the tasks businesses face. The return on investment that can be attained
by implementing a specialised lease accounting and management system are substantial. By implementing a dedicated lease accounting solution, companies can achieve many benefits.

As a part of a broader fiscal strategy, the move to more accurate and effective lease management can be invigorating to a business, ensuring compliance, avoiding fines and reputational damage but also offering key insights into your data and portfolio performance, overpayments and critical data alerts for renewals, enabling you to make better decisions to grow your business. Something that Excel simply cannot provide.